Facts about Solyndra Bankruptcy Case

Solyndra Inc. is back in the news and is now a hot political issue in the presidential election, sharply dividing Democrats and Republicans on the issue of wasteful spending, energy policy and the direction of economic policy. To understand this political debate and its implications for US energy policy, it is important to know the basic facts about Solyndra’s case.



Brief history of Solyndra Inc.

Solyndra Inc. was founded in Silicon Valley in 2004, producing specialized cylindrical solar panels for commercial rooftops. The company came up with an innovative technology of building solar panels without polysilicon. The idea behind this innovation was that due to exorbitant polysilicon prices, solar panels that were built without it would have a major advantage in the market. The other projected benefit of these solar panels was that they were supposed to be cheaper to install than their competitors.

Since the company seemed to have a promising future, in 2005 it was invited to apply for a government-guaranteed loan under the Energy Policy Act that was enacted that same year. This law was backed by bipartisan support under the the Bush administration and was designed to support innovative renewable energy technologies. In 2008, the Department of Energy started reviewing Solyndra’s application and in March 2009, Energy Secretary Steven Chu announced a $535 million conditional loan guarantee to Solyndra Inc. The loan was formally announced in September 2009, and was funded with stimulus money; the problem was that by that point Solyndra was already in deep financial trouble that eventually lead down the road to Solyndra’s bankruptcy.

Why Solyndra went bankrupt

There was a number of factors that converged together causing Solyndra’s collapse. The reality is that none of these factors could have been foreseen or prevented given the nature of the company’s product.  The first factor was that in February of 2008 the price of polysilicon began to fall sharply, taking away Solyndra’s solar panels’ advantage in the market place.



The second factor was a dramatic collapse in the price of solar panels that took place in 2011 and can in large part be attributed to the fact the Chinese solar panel manufacturers started to squeeze out American solar panel manufacturers like Solyndra out of the market. The company’s solar panels were relatively expensive from the start, but cheap solar panels from China made Solyndra’s prices super uncompetitive, and Solyndra did not have enough large commercial clients to create the necessary economies of scale.

Another contributing factor was that natural gas prices also fell during the same time frame, which made investments into a comparatively more risky and expensive solar industry a lot less attractive. This in turn contributed to the fact that the firms’ executives failed to raise required additional capital that would have kept the company afloat. Solyndra filed for bankruptcy in September of 2011, was forced to shut down its Fremont factory and fired around 1,100 workers.

Grounds for a Congressional investigation and subsequent scandal

image of Obama visiting Solyndra before bankruptcy A Republican Congressional committee has been investigating the loan allocated to Solyndra Inc. since 2010. Internal administration emails that have been released show the the White House was warned on numerous occasions and from numerous trusted sourced in the venture capital world the Solyndra is in trouble and will likely go under. Despite these warnings, the administration pressed on with the loan and internal administration emails reveal that the Energy Department asked Solyndra to delay layoffs until after 2010 midterm elections.

In December 2010, the firm failed to make a payment on its federal loan, thereby violating its terms. Despite this, the administration continued to financially support the struggling company, keeping it afloat. In February 2011, Department of Energy restructured Solyndra’s loan, and found new investors who gave the company an additional $75 million in financing. One of Solyndra’s largest investors was a major Obama supporter and financial bundler, George Kaiser. To be sure, the company had a number of key Republican investors as well. These actions by the White House came to be considered as misguided management of funds, and Mitt Romney went as far as accusing President Obama of cronyism and handing out money to his friend’s businesses.



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The Implications of Solyndra’s Scandal & Bankruptcy on Future US Renewable Energy Policy

image of Obama visiting Solyndra before bankruptcy For anybody keeping an eye on developments in the US solar industry, one thing is blatantly clear: solar industry and domestic renewable energy industry as a whole has become a hot political issue, fueled by the upcoming presidential election.

While president Obama saw the domestic renewable energy industry as paving the way for a cleaner environment, new jobs, new markets and investment opportunities, and a means to end our nation’s dependency on foreign oil, his efforts and policies have been vehemently criticized and opposed by the G.O.P. Solyndra’s case is a poignant example of the detrimental influence the current political climate has on the the renewable energy industry. The full implications of this political trend in Washington are hard to predict, but they will certainly set US many steps behind in the global renewable energy race.



Solyndra’s bankruptcy case is made into a political issue and used against Obama in the 2012 presidential race

So why was Solyndra’s case made into a political scandal, in which Obama has been accused of wasteful, irresponsible spending of taxpayer’s money, which was allegedly used to help his cronies? Is there any truth to these allegations or are they all political propaganda cleverly manipulated by the Republicans in the presidential election race?



The reality is that the administration’s decisions in Solyndra’s case do seem to have political considerations, rather than pure economics in mind. As early as March of 2010, an independent audit by Price Waterhouse Coopers raised concerns whether Solyndra was financially viable. Similarly, internal administration emails reveal that administration staff and Obama’s allies in the venture capital world warned the White House that the company may not be a good investment.

However, despite these warning signs, Obama’s administration pressed on and administration officials pushed for the DOE to hasten its final decision on approving Solyndra’s loan just in time for Vice President Joe Biden to announce it on his planned trip to California. Obama also visited the company in a high-profile press event in May 2010, making an already troubled company an example of his successful energy and economic policy. Internal administration emails also reveal that to save face, the Energy Department convinced Solyndra to delay layoffs until after the 2010 midterm elections, according to those emails.

From private sources the DOE was aware that the firm was in danger of bankruptcy, and in December 2010 Solyndra violated its federal loan deal terms by failing to make a payment on its loan. Despite this, the administration put in more effort and money into saving the company. In February 2011, the department restructured the loan, and found investors who provided Solyndra $75 million more in financing. One of the largest investors in Solyndra who also backed this new loan, was George Kaiser (one of the biggest fundraising bundlers for Obama). Part of this deal was that private investors, would be paid back before the government if Solyndra collapsed.

So did Obama want to use Solyndra to help his own political agenda and public image in light of the upcoming election? It seems that they answer is yes. Was  it an economically misguided decision? Yes. However, there is a lot of hypocrisy at play here: a renewable energy company’s ties to the administration are considered cronyism, but the fossil fuels companies’ ties to the G.O.P party and the previous Bush administration, which have afforded this industry lavish financial returns for decades pass with flying colors.

Understanding Solyndra’s case from the perspective of overall US energy policy

While Solyndra’s bankruptcy has been portrayed by most major media outlets as a political scandal, it is important to understand this case in light of the overall US energy policy. While the president has been accused of wasting tax payers’ money during a recession, the reality is that the federal government actually spends a minimal amount on renewable energy, compared to other sectors. A 2009 American Energy Innovation Council Report states that the federal government spent only about $3 billion on energy research (which included help in commercializing the products for start-up companies like Solyndra), compared with the lavish sums of $36.5 billion spent on the National Institutes of Health, and $77 billion spent on defense research. 

Moreover, taking a closer look at the Department of Energy’s 2005 Federal Loan Guarantees Program reveals that it backed close to $38 billion in loans for 40 projects around the country. Just a small fraction of these loans has been allocated to solar. In fact, the program’s largest beneficiary to date is an $8.33 billion loan guarantee for a nuclear plant in Georgia. Solyndra’s loan represents just 1.3 percent of the total program portfolio, but more significantly as of yet, it is the only loan that has soured.  Other solar beneficiaries, such as SunPower and First Solar, are still in business and doing well.

What is important to understand about this program is that it is specifically meant to allocate money to more than average risk start up companies, in which private investors would be too cautious to invest. This is the job that the government takes upon itself in propelling forward industries, such as renewable energy, that have a larger benefit to society than just financial profit. A job, that we as citizens need to be done.

What does it all mean? It means that while there may have been neglect and oversight on the part of the administration in analyzing Solyndra’s application for the loan, Obama’s administration can hardly be accused of cronyism and waste of money solely on the basis of one company’s failure. Numbers clearly show that this failure was an exception rather that a rule.



Politicizing Solyndra’s bankruptcy has potential to negatively effect the future growth and development of domestic renewable energy industry 

Renewable energy industry in this country has a potential for growing and prospering only in the climate of stable government support. Government policy not only directly aids the industry with financial incentives, but also signals to private investors that they can invest large amounts of capital into the industry. In previous years, US solar investments and support for the renewable energy industry in the US has been for the most part bipartisan, where both Republicans and Democrats saw renewable energy as being good for the country and for the environment in the long run. This mind set in Washington allowed President Obama to implement a number of important incentives programs such as the Production Tax Credit (PTC) the Investment Tax Credit (ITC) and others,  that have tremendously helped the growth of both solar and wind sectors of the renewable energy industry.

A number of these key incentives are due to expire both at the end of 2012 and in 2013. In the current political climate, where renewable energy has become a deeply divisive issue for Republicans and Democrats it is highly unlikely that these will be renewed.  Solyndra’s scandal has really added fuel to the fire, further denigrating the whole industry’s worthiness both in the eyes of Washington’s policy makers and the general public. A telling comment by Rep. Cliff Stearns, who chairs the oversight subcommittee of the House Energy and Commerce Committee, sums it all up:” Solyndra’s downfall proves that green energy isn’t going to be the solution”  (Washington Post). How these sentiments will dictate our nation’s future energy policy remains to be seen.

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Environmental Benefits of Eco-Friendly Clothing

image of Clothing manufacturing contributes to environmental pollution Do you know the real price tag of all the cool clothes you bought on that last blow out end-of season sale, in your favorite store? Whether we are trying to keep up with the ever-changing tide of what is fashionable, buying extra stuff because the bargain is too good to pass up, or because we love the GAP, Abercombie, Diesel, etc, so much that we cannot resist just one more t-shirt or a pair of jeans, we just don’t stop to think twice before swiping that credit card.



While we are constantly bombarded with edgy advertising prompting us to buy more clothes that may never see the light of day after hitting our closet shelves, we rarely are aware of the increasing toll on the environment that our rampant clothing consumption is causing. From processing, to manufacturing, to distribution, big clothing manufacturers are causing water pollution, increase he amount of toxic waste dumped into the earth and atmosphere and overall contribute to global warming.

This will continue to happen as long as we continue to buy. Our dollars translate into corporate profit, and as long as large clothing corporations make profit, they will not change course. This means that as consumers we have the real power to help our environment by curbing our consumption and taking a stand by choosing to buy eco friendly clothing instead of the big brands.

Why are we not aware of the environmental damage caused by the clothing industry?

The answer is simple: for the most part pollution is not happening in the United States. Even not as far back as forty years ago, the US had a booming clothing industry, however as consumption demands increased, the increases in processing and production started to cause alarming environmental concerns in the areas where these factories were located. Water and air were being polluted by harmful toxic wastes that were being dumped into them as part of the manufacturing process. The US has strict environmental laws that made it difficult for the clothing manufacturers to keep going at the same rate, so their solution was to move production off-shore to Asia and Latin America. Ever since the move happened, the clothing corporations have a had a field day with no enforceable environmental regulations, and a slew of other major benefits that the host countries provide. The result? They get the pollution, we get the pretty stuff, remaining blissfully unaware of what is really going on.



What is the harm to our Earth?

1. Processing of natural fibers such as cotton as well as synthetic fibers such as polyester in order to make them into fabric requires huge amounts of toxic chemicals, and excessive supplies of water. During this process the toxic wastes are dumped both into the land or into the water, making land unsuitable for agriculture and water for drinking.

2. Using up such huge supplies of water throughout all stages of clothing production contributes to water scarcity on our planet.

3. Dying clothes in all the bright colors that we love so much requires the most water and the most toxic, carcinogenic chemicals, all of which are also released into the land, water and air in the process.

4. Manufacturing process itself causes large emissions of CO2 into the atmosphere, contributing to global warming.

5. Oil is heavily utilized throughout, from processing to distribution, further polluting the environment and contributing to keeping the demand for oil high.

6. Every year, Americans dump more than 12 million tons of textiles. Less than 25% of this waste is recycled, which means the rest goes into our landfills.

Why eco-friendly clothing is the way to go?

Clothing production is a highly polluting process no matter how you slice it. However, Eco-friendly clothing companies make a conscious effort to use environmentally safer practices in their production process. Eco-friendly clothing can take on many different forms. Many of the companies and designers in this niche are local, which means that your purchases will help support the growth of American artisan industry.There are companies that intentionally keep their production small, work with small cotton and silk farmers that use more traditional and environmentally friendly practices of textile production than the big manufacturers do, and in general find ways to cut down on the use of water and toxic chemicals. There are clothing designers that produce handmade clothing, thereby avoiding most of the pollution causing practices outlined above. Other clothing designers make upcycled clothes, using recycled clothing and fabric. The truth is that as more people are becoming aware of the real environmental costs of buying big brands, they are slowly starting to make a switch to more Eco-friendly clothing. As a result, more options in Eco-friendly fashion are becoming available to consumers. Do your research online and read about companies’ production practices to find the ones that show a commitment to our environment. If you look, you will be sure to find many options that fit your style, budget, and make you feel good that now your money is helping preserve our planet.

About the author:

Handmade batik blouse by SolMaleu Yelena is our new writer / contributor, as well as the designer/owner of her own line of eco friendly hand made batik clothing for women – Sol Maleu in Boston, MA,. Yelena is a environmental and human rights advocate, who has seen first hand how large clothing labels produce their products in ways that harm our environment and encroach on human rights, in south-east Asia – particularly in Indonesia and India.



Yelena is committed to producing her batik designs in an Eco friendly manner. She uses environmentally safe dyes, natural wax resists, and saves energy by fixing her dyes using natural sun light. Yelena uses only the highest quality silk, and premium dyes, crafting durable clothing that is meant to be enjoyed for years. Finally, Yelena is committed to keeping her production line small, providing her clients with clothing that is truly special, rather than disposable.

FUEL – A Road to Alternative Energy Sources (the Movie)

I recently watched this movie – Fuel – on Hulu and it made me rethink all that I knew about renewable fuels such as Bio-diesel, Ethanol, Oil and the way transportation is powered. I had a wealth of knowledge on this topic, but after watching this movie, my motivation to be greener in the way we get around, went up by tenfold.

Before I jump into my thoughts, I will state a few facts and what I think about the Oil crisis (peak oil theory) and how we ABUSE our limited resources.

Energy use in US:

Americans use about 25% of world’s energy resources, while our population makes up only about 2 percent of world’s population. We also use about 25% of worlds oil. About 65 percent of oil consumed in US, goes to private commuters – myself included. Every time you drive somewhere you burn gasoline (or diesel fuel), contributing to this astonishing number. Trucking and aviation combined, make less than 30% of America’s oil consumption. So it is you and me who are burning all this oil!



 

1 – Carpooling and ride-sharing:

What really bothers me is when I go into Boston, from the south, there is a 5 mile traffic that barely moves. You see all these cars, trucks, buses and 18-wheelers standing there, moving at 5 miles/hour. And almost every one of these vehicles has only one person in it! And every day, they are willingly standing in this traffic, wasting their time, burning gas, and polluting the atmosphere.

Boston Express way has an HOV lane (express lane for 2 or more people in the car) but almost no one uses it, because the “can’t” carpool. Why? Not only is it’s cheaper – it is also faster! But no – we will stand in traffic, and burn money and time.

I will not even argue the point of global warming, as too many people still deny it. But as a matter of convenience and practicality – why don’t we ride together or use public transportation?

2 – why the hell do you need a V8 full size pickup truck to go shopping?

I don’t know about you, but I see this all the time. A medical office receptionist or a soccer mom driving a huge SUV or a pickup truck. I just want to throw them out of their vehicle. You don’t need this monster to get around, and buy groceries. Get a freaking Corolla! … and don’t forget – this is Boston – not Alabama!

And why do they sit in the car while it’s idling? Just a week ago I went to the Wallaston Beach in Quincy, MA and there is this guy sitting in his car, reading a news paper. It was 90 out and of course he had his windows up and AC blasting. Go for a walk or a swim – isn’t that why people go to the beach?



 

What can be done to stop wasting fuel, and switch to more economical cars, as well as alternative fuels such as bio-diesel?

Do you still remember when gas was $4 / gallon? I do. It was only two years ago, and that’s when I got my Honda Civic hybrid – actually I got it just 3 months after the oil market and global economy crashed. During the record oil prices, reaching $140 / barrel, it was nearly impossible to buy a hybrid, and they were sold at a $2000 premium over sticker price. And at the same time American car industry crashed, as they mostly produced the stupid SUVs and trucks that no one was buying.

So the solution in my mind is simple. We need $4 or even $6 / gallon gas in this country (as is the case everywhere else in the world) – only then will Americans wake up and switch to economical cars.

You want to drive your Hammer – sure, it will cost you 50 cents per mile! I have no real problems with trucks and SUVs – in fact I own a Toyota Tundra myself. Its a V6 though, and I rarely drive it – only when I really need it. In fact, for the last six months (with VERY rare exceptions) I’ve been driving my Toyota Prius to most of my roofing appointments, and I get around the the situation with ladders just fine. I have an 11 foot telescopic ladder, and all my tools and rubber roof repair materials fit in the car just fine, and there is even room for my folding bike. Most home owners have a ladder in their backyard, so I don’t need to bring one, and therefore I don’t need my truck!

Yes I do drive a lot due to the nature of my work and there is not much I can do about it – I need to get to work, and usually there is no public transportation there and I can’t carry 5 bags of tools and roofing materials with me on a bus. But I drive in the greenest way possible.

So I’ve identified the solution to switch Americans to more economical means of transportation – since we only react when something becomes too expensive, we need higher gas prices. But how do we go back to $4 gas?

Fuel – the movie – switching the world to green fuels:

First, I want you to watch this awesome movie, so you and I are on the same page. Bellow is the embedded player, so you can watch it without leaving this site.





 

So what can be done to switch from gas and diesel fuel to ethanol and bio-diesel?

First – you should know that most of the car fuel used in Brazil is home-grown ethanol. And diesel engines were actually designed to run on vegetable oil – back then there was no diesel fuel! And Ford model T was 100% compatible with ethanol, which Henry Ford produced and sold, until Standard Oil pushed for a ban on all alcohol production in the US.

As I said before, the only thing that will move the masses, is economical reasons. We can scream “global warming” all day long, and nothing will happen. People don’t care – I know because I’ve been trying to convince my friends not to waste energy and other resources for years, and they look at me like I’m an idiot :)

First, the reason gas is so cheap in the US, is because of the subsidies to the oil companies, for which we pay anyway, through our taxes. The only way it will change is if the government removes these subsidies, and so far the “oh-so-green” Barack Obama has done NOTHING. And neither have the republicans. In my opinion, we need to vote most senators and congressmen out of the office. New people will not have such strong ties to the Oil Industry as the current gang of politicians (both democrats and republicans). And it is doable – Scott Brown became a senator in predominantly democratic Massachusetts.

Second – the new blood must be more educated. I will personally buy a few copies of “Fuel” and distribute them in public schools in my town, so it is shown to all kids there. Hopefully my plan will work, and school management agrees to show it – after all Mass is all democratic and green :)

I am also starting my research on small algae plants to produce bio-diesel and will work with local green-collar businessmen to possibly set it up here for mass production.

Why am I doing all this – why do I want green fuels?

Besides my personal outrage with the current situation with energy and resources, I will be a daddy in just two short months, and I do not want my daughter to grow up with polluted air, dirty lakes and oceans, and other perks of global warming. Its time to start doing more than just driving a hybrid and turning down the thermostat. It’s time to get the general public involved!

PS – join the unofficial “Boston Prius club” and share your story.